Rachel Reeves' fiscal trilemma gets even tougher
The Rundown by PoliticsHome
PoliticsHome
4.1 • 105 Ratings
🗓️ 17 January 2025
⏱️ 35 minutes
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Summary
A difficult financial outlook has got even tougher for Rachel Reeves in recent days, so what is happening to the UK economy, and just how difficult will things get for the Chancellor with the next OBR forecast and the spending review looming? To take a deeper look at what is fuelling the current market turmoil, and ask whether things really are as bad as during the Liz Truss era, host Alain Tolhurst is joined by Dr Isabel Stockton, senior research economist at the Institute for Fiscal Studies, as well as the Labour MP and member of the Treasury select committee, Jeevun Sandher, and Cameron Brown, a former Treasury special adviser under the last Conservative government.
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Presented by Alain Tolhurst, produced by Nick Hilton and edited by Ewan Cameron for Podot
Transcript
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| 0:00.0 | Hello and welcome to The Rundown, a podcast from Politics Home with me, Alan Tolest. |
| 0:10.0 | This week, we're taking a deeper look at what is going on with the British economy, |
| 0:13.5 | what has fueling the current market turmoil, are things really as bad as during the Liz Trust era, |
| 0:18.3 | and what does this all mean for Rachel Reeves as she tries to |
| 0:21.0 | boost flagging growth and fund public services while also sticking to her tight fiscal rules? |
| 0:26.3 | Well, to navigate through all of that, I'm delighted to be joined by three fantastic guests |
| 0:29.3 | who know an awful lot more about the economy than I do. Firstly, we have Dr Isabel Stockton, |
| 0:33.0 | senior research economist at the Institute Fiscal Studies, as well as the Labour MP and member of the Treasury Select Committee, Jeevan Sander, and Cameron Brown, former Treasury Special Advisor |
| 0:40.8 | under the last Conservative Government. |
| 0:45.8 | So I'll start with you, Isabel. Can you just explain a bit what is happening in the economy |
| 0:51.1 | at the moment? There's something pretty extraordinary happening with British guilt. |
| 0:53.7 | The yield on the 30-year UK bonds has fallen back a bit in the economy at the moment. There's something pretty extraordinary happening with British guilt. The yield on the 30-year UK bonds has fallen back a bit in the last couple of days, but it |
| 0:59.3 | reached its highest level since 1998 on Monday. Yeah, so we've seen a lot of movement in guild markets. |
| 1:07.3 | We've also seen some movement in inflation expectations. So markets seem to be expecting |
| 1:13.1 | higher inflation even into the medium term. And hence, it's reasonable to also expect the Bank |
| 1:18.8 | of England to keep its interest rate higher for longer. As you say, these things are volatile. They've |
| 1:25.7 | moved up. They've now just very recently come down |
| 1:28.9 | a bit again. And it's really unknown how much all of this is going to persist. And that, |
| 1:36.4 | of course, is going to be important for how much of a headache is really going to be for fiscal |
| 1:41.8 | policymaking. Now, of course, coming into this year, we are in a situation |
| 1:47.5 | where even at the last budget, the Chancellor left yourself a very narrow margin against her |
| 1:54.0 | main fiscal rule. So even if the movement is not that big on sort of the scale of things, |
... |
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